Money Morning’s Keith Fitz-Gerald brings us a sobering look at investing in gold. If there is a moral to the story, it’s that nothing is what it seems anymore – not even gold.

Keith Fitz-Gerald (Money Morning): Millions of investors who bought gold in the last 12 months are undoubtedly very happy at the moment – considering that the yellow metal has risen 60% since last November to a recent close of $1,138.60 an ounce on Monday.

But chances are good that many won’t be smiling when they discover just what the taxman has planned for their gains.

Unbeknownst to most investors, gold is considered a collectible not a capital asset. In plain English, this means that despite the fact that many people believe they are investing in gold, the Internal Revenue Service (IRS) believes that they are collecting it.

This is no small distinction and hurts investors

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In TV commercials and across the Internet, managers of exchange-traded funds tout the tax advantages of their products. But according to a story in the latest issue of Barronrsquo;s, many investors in precious-metals ETFs have to deal with an unwelcome surprise come April 15. The issue is that gold and silver fall under the heading of ldquo;collectiblesrdquo; in the eyes of the Internal Revenue Service, making these metals similar to artworks, antiques, vintage wine and rare baseball cards. This status means that profits from gold and silver investments do not qualify for the 15 percent maximum on long-term capital gains that pertain to stock and mutual fund investments. These profits are instead taxed at a 28 percent maximum if held for more than a year, and at ordinary income rates if held for less than a year. With the rapid appreciation of gold in recent years ndash; the current price is nearly double where it ...

I visited the Wall Street Journal offices this morning to discuss gold and commodities markets with reporter Simon Constable. Simon and I discussed goldrsquo;s volatility and demand concerns. I also outlined who some of goldrsquo;s key constituents are: There are what they call the price takers and the price makers. The price takers are the jewelers...theyrsquo;re a huge part of the demand equation. The price makers are the investment people who are worried and have a lack of confidence in the governmentrsquo;s policies about the currency. All opinions expressed and data provided are subject to change without notice. Some of these opinions may not be appropriate to every investor. The following securities mentioned in the interview were held by one or more of U.S. Global Investors family of funds as of September 30, 2009: SPDR Gold Trust. #09-758

Gold was steady on Monday after briefly falling below $990 an ounce, as the euro trimmed some losses versus the dollar, but bullion looked vulnerable to a long liquidation after it failed to stay above $1,000 an ounce.

Physical demand was also supportive for the precious metal, traders said, who saw the jewellery demand picking as as the festive period in India, one of the top gold consumers of the world, approches.

Spot gold was at $991 an ounce by 1121 GMT, slightly up from $990.95 an ounce late in New York on Friday, when gold hit a two-week low of $984.70 an ounce.

“The stronger dollar is the reason which pushed gold below the $1,000 an ounce level,” said Eugen Weinberg, Commerzbank analyst said. “On the other hand, we’d expect a pick-up in physical demand if prices decline ahead of the festive season.”

Gold’s inverse relationship with the dollar over the past few weeks

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Gold’s Two-Faced Disappointment

With the price of gold again pulling back from its 18-month highs this morning, we start to see more cracks in the bullish $2000 an ounce gold argument. But that shouldn’t surprise. Gold is a two sided, two-faced coin that has very distinct personalities.

On one side, we have the hedge against inflation, a reserve currency and the only grail that gold bugs from around the world will believe in.

On the other, we have gold as a real commodity, used in jewelry, electronics, computers and space components.

But all that glitters isn’t golden, and gold investors can’t have it both ways.

The best question we’ve heard to date has been where will you spend you golden Krugerrands when the world comes to an end? The answer is you won’t be able to spend them, anywhere.

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Gold prices extended gains above $1,010 an ounce in Europe on Friday as the dollar index’s <.DXY> tumble to one-year lows fuelled interest in the precious metal as an alternative asset.

Its gains lifted prices of other precious metals, with silver and platinum both rallying to multi-month highs in its wake.

Spot gold rose to a high of $1,011.55 an ounce, its firmest since February 2008, and was bid at $1,009.50 an ounce at 1437 GMT against $995.50 late in New York on Thursday.

Citigroup analyst David Thurtell said the dollar was providing most support to gold. “The dollar seems like it could be heading for $1.50 against the euro. There are bound to be people seeking currency hedges, and gold’s a good one,” he said.

Nonetheless, gold’s inability to hold above the $1,000 an ounce level in previous runs higher was likely to encourage profit taking at these levels, he said, while an increase

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[Editor’s Note: If you’re new to the commodities-investing arena, and are uncertain about the landscape – or even if you’re an “old hand” at natural-resource stocks, but want some insights into the new profit plays and new players – consider hiring a guide: Money Morning Contributing Editor Peter Krauth, a recognized expert in metals, mining and energy stocks, is also the editor of the Global Resource Alert trading service, which ferrets out companies poised to profit from the so-called “Secular Bull Market” in commodities. A former portfolio advisor, Krauth continues to work out of resource-rich Canada, which keeps him close to most of the companies he researches. Against the growing global financial malaise, Krauth says that commodities are among the most-profitable and least-risky investments available, and notes that this may well be the most powerful bull market for commodities we’ll see in our …

London-based ETF Securities launches new gold ETF, its second U.S. product.

 

Just as gold is showing its strongest performance in a year, exchange-traded fund provider ETF Securities is set to launch its first bullion-backed gold fund. The ETFS Physical Swiss Gold Shares, backed by one-tenth of an ounce of Swiss-stored physical bullion per share, is set to begin trading on Wednesday through the NYSEArca exchange under the ticker SGOL.

ETFS Physical Swiss Gold Shares will go head-to-head in competition with existing bullion-backed ETFs such as SPDR Gold Trust (NYSEArca: GLD) and iShares COMEX Gold Trust (NYSEArca: IAU), both of which have hit 52-week highs this week on a surging gold price.

Gold ETF holdings have risen 42 percent, or 16 million ounces year-to-date. Bullion-backed ETFs hold 54.23 million ounces of gold, more than many central banks and around the levels of last year’s total production amount. (See Wall Street Journal story here.)

The

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Gold eased on Wednesday, giving up earlier gains, as the dollar recovered losses against the euro after U.S. durable goods data failed to impress, tempering appetite for the metal as an alternative asset.

But prices remained rangebound as traders awaited clearer direction from the currency markets.

Spot gold was bid at $941.80 an ounce at 1523 GMT, against $943.55 an ounce late in New York on Tuesday. Earlier it rose as high as $949.85.

U.S. gold futures for December delivery on the COMEX division of the New York Mercantile Exchange were down $1.8 at $944.20 an ounce.

“We are probably going to stay fairly rangebound,” said Standard Bank analyst Walter de Wet. “We would have to see some decent dollar weakness for gold to move above $956-960.”

The dollar rose versus the euro and a currency basket, reversing early losses, after durable goods numbers from the United States.

The data showed June orders for durable goods, excluding transportation,

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As the U.S. and global economies stabilize, economists wonder how U.S. Federal Reserve Chairman Ben S. Bernanke will manage to reverse all the monetary stimulus that has been infused into the economy over the past year and prevent inflation.

My guess is that he won’t be able to do so, meaning investors need to position themselves now for the “stagflation” that’s almost certain to come.

Let me explain how I believe this will all play out.

In Federal Reserve’s Monetary Policy Report to Congress – as well as in an op-ed piece in The Wall Street Journal – Bernanke acknowledged the potential danger inflation poses and outlined an “exit strategy” that described a “smooth and timely” withdrawal of monetary stimulus.

However, the Fed chairman was vague about exactly how he will know when to implement that strategy, and the reality is that the exit …